According to a report by Takashi Mochizuki, Chinese companies Tencent Holdings Ltd. and NetEase Inc. are scaling down, reconsidering, and ending their Japanese ventures.

NetEase’s Ouka Studios has been effectively shuttered. Staff has been continuously reduced since spring. At time of Visions of Mana’s release, only a skeleton crew remains. Intentions are to shut the Shibuya outfit, in stark contrast to the flourish of the opening four years ago: hiring veterans from Capcom and Bandai Namco to build an investor-impressing “dream team” of proven talent.

Based on anonymous sources, Tencent is also reducing the pace and scale of investments in the Japanese market: the company has refused making commitments for funding new games.

The companies sought to escape a stagnating home market by funding projects and managing studios in one of the world’s largest gaming markets. This has failed to pan out. In 2023, hoping for a franchise, Tencent developed and published the mobile edition of Bandai Namco’s Blue Protocol. Instead, the game will be closed next year.

“Shenzhen-based Tencent, the world’s biggest games distributor,” wrote Mochizuki, “has been frustrated by its interactions with Japanese developers, in part because of a mismatch in ambition between the Chinese firm and local partners, the people said. Local creators are adept at smaller-scale, lower-risk projects, whereas Tencent went to Japan in search of tentpole franchises to take global, one of the people said. Since late last year, Tencent has been setting higher goals and expectations when offering money to studios, according to the people.”

“We may be approaching a point where Tencent and NetEase begin to scrutinize their returns more closely,” Bernstein analyst Robin Zhu said. “Globally, the video gaming industry has retrenched post-Covid, and many large publishers have reduced headcount or scaled back investments. Anecdotally, the Japanese developers’ desire to tightly control what can be done with their IP has sometimes been a source of friction.”

The last statement in Zhu’s quote is illuminating, both about the situation for Ouka Studios and for the possible situations of many other studios NetEase or Tencent have invested in.

Both Tencent and NetEase have issued statements about their continued commitment to their Japanese holdings.

In an email, Tencent wrote that it remains committed to partner studios and developing its business in Japan. NetEase said it had “nothing to announce” about closing Ouka, and reiterated the progress other studios are making.

“In supporting studios outside China, we craft our strategy based on our goal of providing better gaming experiences to local and global players,” a NetEase spokesperson said. The company is, “thus always making necessary adjustments to reflect market conditions.”

These statements contrast with conditions on the street, where the makers of the critically and commercially successful Visions of Mana were progressively fired prior to launch; these statements further contrast with the way many of their backed projects have stalled, gone silent, or been quietly cancelled.

Tencent and NetEase have shifted their sights toward western developers. NetEase maintains a stake in Second Dinner, developer of Marvel Snap. Tencent either directly or indirectly owns Riot Games, Digital Extremes, and Supercell Oy. It maintains significant stakes in major developers like Larian Studios and Remedy Entertainment.

It is wise to always remember Ouka Studios, both what they accomplished and how they ended.

Source: Bloomberg

Featured Image: Square Enix

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